Editors Note: This piece was originally published on putnam-consulting.com.
I’ve been hearing a lot lately about funders weighing the options between strategic grantmaking and responsive grantmaking. The general angst seems to come from a sense that all funding must be strategic in order to make a difference. While it’s true that strategic philanthropy (as described below) can lead to broader or deeper outcomes, there is a time and a place for both. Let’s take a look at each:
Responsive grantmaking is being open to receiving proposals and ideas from any nonprofit, and allowing the nonprofits to drive the agenda. Requests are initiated by the nonprofit, rather than by a funder seeking them out. This doesn’t mean that a foundation doesn’t have core areas of focus, but that within those areas is wishes to be responsive to the needs nonprofits feel most keenly. For example, a funder may focus on substance abuse, but be open to supporting a wide range of prevention and treatment programs, as well as programs serving youth and families to address multi-generational factors that lead to abuse.
From a positive perspective, responsive grantmaking:
- Allows new ideas to come into the foundation
- Allows for rapid response to new needs
- Can support a wider range of issues
- Helps a foundation learn about its community
- Is easier in some ways, because it does not require a lot of planning or effort
- Provides greater opportunities for funding for nonprofits
The cons of responsive grantmaking are that it:
- Is less likely to make a deep impact in a specific area, because funding is widely dispersed
- Makes it more difficult to assess and describe what a funder has accomplished with its portfolio
- Is more likely that a funder will have to respond to a greater number of proposals
In general, responsive grantmaking makes sense when a funder is just getting started – either as a new foundation or as an established foundation that is wading into a new issue area. Responsive grantmaking also can be a way to show support to the community when a funder is not yet ready or able to put the required effort and resources into a strategic approach. And for some foundations, responsive grantmaking is simply the best fit for their missions – particularly those whose missions are very broad and highly localized.
Strategic grantmaking (also called proactive grantmaking) is grantmaking with more focused goals, and a defined set of strategies for how a foundation wants to accomplish those goals. The funder drives the agenda rather than the grantees, although it is best to include grantees in the creation of the goals and strategies. Strategic funders typically see themselves as accountable for successful outcomes. For example, using the substance abuse example from above, a strategic grantmaker may decide to focus on reducing the stigma of substance abuse, and deploy strategies that include a statewide communications campaign, increased support for AA and Alanon, and policy advocacy to health insurance providers to cover treatment.
The pros of strategic grantmaking can include:
- Improved likelihood of having an impact on a specific issue
- The ability to craft funding to utilize best practices or evidence based practices
- Building deeper relationships and partnerships with grantees
- Greater opportunities for partnerships, collaboration with other funders
- Deeper learning about the target issue
- More ease in communicating about progress and accomplishments
- Signaling the importance of an issue
- Enhanced reputation for the funder, or recognition for knowledge and impact in a particular issue area
- Less time responding to proposals, since strategic funders often invite specific organizations to apply
On the con side, strategic grantmaking can:
- Limit funding to specific areas, making a foundation less open to emerging needs or new ideas
- Take time and resources to conduct research and develop strategies
- Make it difficult to change direction
Strategic philanthropy usually makes sense after a foundation has been funding responsively for a while and has learned a lot about a specific issue it can address strategically. It also makes sense for funders that are very clear in their mission or intent to make a difference in a specific area. In either case, funders who engage in strategic philanthropy must be ready to commit to their strategy for the long haul.
Responsive and strategic philanthropy are not mutually exclusive. In fact, most funders employ a combination of both. For example, within a particular program area, a foundation may devote a portion of its portfolio to one strategic effort and the balance to responsive grants. For example, the Firelight Foundation, which is committed to support children with HIV in Africa, strategically invests in programs to increase HIV resources and knowledge, but reserves a portion of grants for grassroots nonprofits, because the Foundation believes that they know best what will work in their community.
Other funders may use responsive philanthropy to power a “learning phase” of its work, then use its accumulated knowledge to develop a strategic grantmaking initiative for “phase two.”
And even the most strategic of funders can use responsive philanthropy to help change course or undergird a strategic investment. For example, a natural disaster or economic hardship in a community requires funders to respond to immediate needs. And within a strategic initiative, unanticipated challenges may surface that require responsive grantmaking, such as an unexpected gap nonprofit capacity among organizations that are part of that initiative.
The bottom line? Strategic grantmaking vs. responsive grantmaking isn’t an “either/or” proposition. Both approaches have value, and funders should always explore both as options in achieving their goals.